TVA directors said Thursday that changes must be made to the utility's underfunded pension plan, but TVA retirees appealed to the board to modify their proposal to cut $700 million of retirement benefits for the nearly 35,000 employees and retirees covered by the TVA retirement system.
The Tennessee Valley Authority is asking its pension board this month to agree to trim future benefit increases and freeze some employees' pension accounts as part of a 20-year plan to shore up a retirement plan that actuaries say is $6 billion short of what it needs to pay promised benefits.
"Nobody is happy in having to make these adjustments in the pension plan, but it has become necessary for us to address this issue," TVA Director Virginia Lodge said.
With only 53 percent of the money it needs in the retirement system following investment losses and increasing costs, TVA has agreed to bump up what it contributes while trimming the number of employees and amount of some future retiree benefits.
Last year, TVA paid $690 million in benefits to more than 23,000 retirees and their family members, up from only $290 million in 2000 even though TVA's working staff has been cut by thousands of workers. TVA lost $762 million on its investments last year, nearly three times more than the $278 million TVA put in the plan.
Pete Mahurin, chairman of TVA's finance and rates committee, said TVA "can't kick the can down the road anymore" and must deal with the growing shortfall in the pension by a combination of trimming costs and raising contributions.
But the TVA Retirees Association, whose leaders spent the past couple of months studying proposed caps on cost-of-living increases for future benefits, told the TVA Retirement System board last week that the association "rejects the current proposal as presented.
"The overwhelming majority of our membership that has responded is opposed to the current proposal by TVA," said Suzan Bowman, president of the TVA Retirees Association.
On Thursday, Bowman appealed to TVA directors and executives to come up with a better way to protect the retirement benefits employees say they were promised while working at the federal utility.
"I come here today to ask you please to take one more look, one more opportunity for a compromise," Bowman told the board. "I believe strongly that you can arrive at a solution with the TVA Retirement System board and you can win the struggle by giving just a little. We need to protect the relationship that TVA has with its retirees."
Other retirees have taken TVA to court over previous cutbacks in pension benefits and some retirees have organized a new chapter of the the National Retiree Legislative Network to lobby Congress to pressure TVA to adequately fund the pension plan.
"It is intolerable, given TVA's record profit of $1.1 billion net income in 2015 and the multi-million dollar salaries and bonuses of top executives, that the pension plan has only 53 percent of the assets necessary to cover its pension obligations," said Mike Moseley, a retired TVA employee who lives in Bowling Green, Ky., and is one of the leaders of the new Tennessee Valley Authority Retirees Coalition.
TVA is exempt from federal regulations required of private employer pension plans and therefore lacks the government guarantee provided other retirees under the Pension Benefit Guarantee Corp. under the Employee Retirement Income Security Act (ERISA).
"Congress should do more to make sure that TVA follows a similar standard as ERISA," Mosely said.
TVA President Bill Johnson said the reforms he has proposed "are fair to all" by balancing benefits to employees without having to make major increases in TVA rates to pay for shoring up the pension plan.
"We know there is no quick fix to this shortfall," Johnson said. "But we also know we must continue to fulfill our commitments and our obligations by balancing rates and long-term obligations without negatively impacting the residents in the Valley."
TVA's biggest customers expressed concern that TVA not balance its underfunded pension plan on the backs of ratepayers with any immediate jump in electricity prices.
"We have utilities around us that rely more on natural gas (which has dropped in price) that are reducing their prices so any additional cost that TVA takes on will widen the competitive position (favoring other utilities) for TVA," said Lloyd Webb, a manager at Olin Corp. in Charleston, Tenn., who is chairman of the Tennessee Valley Industrial Committee.
At the end of the last fiscal year in September, TVA's employee pension was only 53 percent funded with liabilities of $12.8 billion and assets of $6.8 billion.
Johnson told reporters that TVA and its retirement system board continue to talk with a variety of constituents, but he maintained that the changes in benefits are fair and reasonable, given the current funding status of the plan.
"We are not negotiating with anybody, but we are listening to everybody," Johnson said.
The TVA Retirement System board has promised to decide on TVA's proposed changes in benefits by the end of February.
Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.